NCPA - National Center for Policy Analysis

Brazil Turns To Private Sector For Central Bankers

February 16, 1999

In a radical move for any government entity, Brazil's central bank has purged a number of career civil servants in positions of power and replaced them with young, relatively unknown economists from prestigious local banks.

  • Four of the seven members of the central bank's board arrive from the private sector -- with the remaining three directors being career civil servants in charge of back- office functions.
  • Even early free-market champions, such as Chile, have been unable to break with the Latin American custom of appointing career technocrats and civil servants to guide central banks' policies.
  • Experts say that tradition has tended to ossify decision- making in times of severe market turmoil.
  • The board must still be approved by Brazil's Senate -- a formality expected by the end of this month.

But because board members will be presidential appointees, they can be fired at any time. Critics read this as a measure of the bank's continuing lack of independence.

Source: Peter Fritsch, "Brazil's Central Bank Picks a Private- Sector Team," Wall Street Journal, February 16, 1999.


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